Tuesday 19 January 2021

Supply chain problems begin to mount

The CEO of The Cold Chain Federation has written another long Twitter thread about the crisis rapidly developing at our borders for fresh and chilled products. He talks about the "growing unease" that the low trading volumes will become the new normal. He says worries about how we feed ourselves have trumped what is perhaps the greater threat of the collapse in our EU export trade, particularly in the food industry.  His tread starts below if you want to go through it:

He pours cold water on the idea there are quick 'fixes' or easements of the sort that some companies are calling for. Brennan says they are a 'pipe dream' because the UK government won’t ask and the EU won’t allow them anyway.

It's up to individual businesses to solve their own problems and many have accepted that and have started to try and manage things as best they can. He says "The cost, stress and inefficiency is really bad for them too, but they are facing in to it and they have bought the best people, IT, and agents."  The problem of course is that there simply are not enough of them.

He is utterly scathing about ministers:

"I bet @michaelgove even genuinely believes the patronising ‘get matchfit’ thing.

"What I don’t see any evidence of is THE PLAN. Statements like ‘happy British fish’ @Jacob_Rees_Mogg and ‘no border in NI’ @BrandonLewis might please one political base and troll another - but what they also do is undermine business confidence that Ministers have a grip.

"I mean some of us have even read the trade deal 👀@VictoriaPrentis  …" 

Where is Gove by the way?  We see no sign of him at all amidst the growing chaos.

In the longer Brennan believes we need to start thinking about how we expand trade elsewhere. The EU deal is surprisingly "thin" he says and he asks how will the UK Gov support UK food business to trade "outside of the comfort zone of a massive trading block?"

"Being confident about ‘brand Britain’ is important - but having bulldog spirit won’t carry us that far. Re-signing existing deals we already had when in the EU and naming English speaking places in the world that we plan to get a new trade deal with is not a complete strategy."

He urges people to get out of the mindset that "all that matters is what we buy - our meat industry is a great example - we consume a lot of what we produce, but for our producers to be profitable selling the cuts we don’t eat to other markets is a key to being sustainable."

If we want to bring in more food from the USA, China or Brazil we will need more warehousing. Brennan says it's actually easier to handle shipping containers than it is to manage the fast integrated trade we do with our neighbours, but he is not sure "how good that will be for the planet, or what that will mean for the quality and variety of goods we have on our shelves."

This may or may not be a good thing he adds, it is a clear choice we can make now - and one that is perhaps already signalled by us extracting ourselves from the EU’s regulatory sphere for food.  But there is no clear plan coming from government, and industry is busy trying to re-forge the links of those integrated supply chains built over years of intra EU trade.

Unfortunately, he concludes, for every market that gets added to the FTA target list we hit a new set of contradictions and tensions. 

"We have to assume that a key reason we did not include a pretty obvious reciprocal deal on equivalence of food standards with the EU was linked to hopes of US deal. But Ministers are also categoric we will not accept chlorinated chicken..etc. Feels optimistic to me, but do you know what would have helped in convincing US we couldn’t move on food standards in a tough negotiation? - if we were bound by a set of standards we shared with the EU.

"That to me would have been evidence of a trade game plan - that married the rhetoric of higher standards with a plan for entering the next set of tough trade negotiations. Instead we are in the dark as to what the hope is, let alone what is achievable."

Yesterday, the British Meat Producers Association warned of more trouble ahead, according to Reuters. 

British meat companies have cut trade volumes with the EU and Northern Ireland to about 20% of normal for the first two weeks of January apparently, in an attempt to ease into the new customs checks. But even so, there have been “catastrophic delays”, and the BMPA warned of worse to come as meat firms, together with a flood of other industries, are due to start ramping up exports from this week onwards.

"The current paper-based customs and certifications system is a relic. It was never designed to cope with (an) integrated, just-in-time supply chain,” said Nick Allen, head of the BMPA.

The governments demand for a Canada style FTA has resulted in a deal signed between two distant trading partners where there is little trade in small shipments of fresh and chilled produce. Instead, goods are sent frozen in large container loads.  It is entirely unsuited to the time-critical cross Channel trade that we are used to here in the UK.  There is unfortunately, no quick solution to that either.

London saw quite a demonstration yesterday as shellfish trucks circulated around Westminster to raise the plight of the fishing industry

Johnson seemed to promise compensation for the fishermen and the processors while they get over the "teething problems" and learn to fill in the forms correctly - as he claims.  He still doesn't understand the problems are here to stay and will deliver a hammer blow to EU-UK trade.

If fishermen do get compensation, the meat industry will follow quickly behind and once the principle is established, the car industry and everyone else will seek the same treatment.

But the government has set us on a course from which there is no obvious escape. The deal is not going to be renegotiated - it would be an admission of failure for a start - and we are not going back to shipping food from Africa or the USA overnight. It will take months of not years to gear up for that.  We are between a rock and a hard place.

EU supply chains have been broken and it's hard to see them being restored quickly and certainly not to their original volumes.   More food will need to be grown here but if farmers are competing against low cost produce from around the world, they also face problems.

To return to Mr Brennan's excellent thread, this is all focusing on how we feed ourselves. Exporters are going to be badly hit and will have to find new markets and this may, as he points out. be the bigger issue in the long run.

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